Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion

Eric Bond and Kamal Saggi

Chapter 20 in Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, 2023, pp 449-480 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We analyze bargaining between a developing country (South) and a multinational firm over the local price of its patented product. We use an alternating offers bargaining game in which the South can resort to compulsory licensing (CL) if the two parties fail to reach agreement by a certain deadline. The presence of international price spillovers introduces two novel features into the standard bargaining problem: the surplus from entry prior to the CL deadline may be negative, and CL can yield higher surplus than entry. We establish conditions under which equilibrium may exhibit immediate entry, preemptive entry just prior to the CL deadline, or the occurrence of CL. The South necessarily gains from the threat of CL if the joint payoff under entry is higher relative to CL but can lose if it is lower…

Keywords: International Technology Transfer; Multinational Firms; Trips; Foreign Direct Investment; Oligopolistic Competition; Vertical Contracts; Intellectual Property Rights (search for similar items in EconPapers)
JEL-codes: F21 (search for similar items in EconPapers)
Date: 2023
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Related works:
Journal Article: Bargaining over Entry with a Compulsory License Deadline: Price Spillovers and Surplus Expansion (2017)
Working Paper: Bargaining over entry with a compulsory license deadline: Price spillovers and surplus expansion (2016)
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